Why are house prices so high and property so scarce?
One of the key questions that is frequently asked by many, is why are UK house prices reaching such high levels, with soaring increases seen each year? There are many common theories given to a question such as this, whether it’s ‘greedy’ second homeowners out-pricing locals, ‘selfish’ older homeowners not downsizing to allow a new generation to aspire to larger properties, or landlords buying up property, putting it out of reach for ‘ordinary’ buyers and first-time buyers.
All of the above reasons may well be valid, but it’s easy to get overly emotive on the topic, and to miss the overall picture, which is ultimately based on supply and demand. Looking through a purely economic lens, for the housing market in the UK, the shortage of supply means that for as long as people have the means and desire to buy, the prices of available property will continue to increase.
Not enough houses are being built to meet demand and as with all other commodities where demand outstrips supply, the importance of that commodity is expressed in terms of its value put upon it by potential buyers.
As we enter the final quarter of the year with a new King and a new Prime Minister, it is good to see that housebuilding statistics have turned positive. The National House-Building Council (NHBC) reported that 40,289 new homes were completed by the end of the second quarter of 2022. This represents a 16% rise compared to the same period last year(1), which is great news for potential homebuyers, as it helps to try and tame the otherwise skyrocketing property prices in the UK.
Furthermore, figures for the number of new homes that are registered – but not yet built – total 66,855, which represents a 45% increase on 2021. The largest increase in new home completions can be found in North East and the East Midlands, compared to the NHBC’s data from last year1.
Whilst the UK property has continued to see strong growth this year, with demand 20% higher than during the pandemic(2), it is hoped that the growth in homebuilding does start to provide some opportunity for both existing homebuyers and first-time-buyers to get onto the property ladder.
If you’re interested in finding out more about moving, whether you’re seeking a new build home or an existing property, please don’t hesitate to get in touch for an appointment to review your current circumstances and answer any questions you may have.
Sources:
1 – NHBC (2022) New home completions return to pre-pandemic levels in Q2. Available at: https://www.nhbc.co.uk/media-centre/statistics/2022/08/11/new-home-completions-return-to-pre-pandemic-levels-in-q2 (Accessed 26/09/22)
2 – Landberg, R. (2022) UK House Asking Prices Rebound With Strongest Growth Since May. Available at: https://www.bloomberg.com/news/articles/2022-09-25/uk-house-asking-prices-rebound-with-strongest-growth-since-may (Accessed 26/09/22)
All the information in this article is correct as of the publish date 29 September 2022. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
